What are the Duties and Responsibilities of an Auditor?

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The duties of an auditor are laid down by the businesses Act, 2013, provided in Section 143. The Act explains the duties in a simplified manner, although the list given isn't exhaustive.

  1. Prepare an Audit Report
 An audit report, in simple terms, is an appraisal of a business’s financial position. The auditor is liable for preparing an audit report supported by the financial statements of the corporate. The books of accounts so examined by him should be maintained per the relevant laws. He must ensure that the financial statements comply with the relevant provisions of the Companies Act 2013, relevant Accounting Standards, etc., In addition to the present, he must ensure that the entity’s financial statements depict a real and fair view of the company’s financial position. The fundamental duty of a company’s auditor is to make a report regarding accounts and financial statements examined by him and present the same to the members of the company. Such an opinion of the auditor enhances the credibility of the financial statements. This is because it provides reasonable assurance from the auditor that the financial statements provide a true and fair view of the company’s state of affairs. Furthermore, such an auditor’s opinion assures that the report has been prepared taking into consideration the accounting and auditing standards.

  1. Form a negative opinion, where necessary
The auditor’s report features a high degree of assurance and reliability because it contains the auditor’s opinion on the financial statements. Where the auditor feels that the statements don't depict a real and fair view of the financial position of the business, he's also entitled to make an adverse opinion on the same. Additionally, when he finds that he's dissatisfied with the knowledge provided and finds that he cannot express a correct opinion on the statements, he will issue a disclaimer of opinion. A disclaimer of opinion indicates that thanks to the shortage of data available, the financial status of the entity can't be determined. However, it's to be noted that the explanations for such negative opinions are additionally to be laid out in the report. The auditor needs to give his opinion in the auditor’s report. Such an opinion is often qualified or unqualified. An unqualified opinion is the one that concludes that the company’s financial statements present its affairs fairly in most of the important aspects. Furthermore, it states that the company complies with the necessary statutory requirements and Generally Accepted Accounting Principles (GAAP). A qualified opinion, on the opposite hand, concludes that the corporate has addressed most of the problems apart from the few ones. Under this, the auditor has to offer even an opinion regarding the company’s financial statements. Such an opinion must be given when the auditor disagrees with the management regarding the application, acceptability, or adequacy of accounting policies.

  1. Make inquiries
Each auditor must hunt access to books of accounts, vouchers, and other information and explanation from the corporate. One of the auditor’s important duties is to form inquiries, as and when he finds it necessary. A few of the inquiries include: -
  • Whether the loans and advances made by the company based on security have been properly secured. Furthermore, he must inquire whether the terms and conditions on the idea of which such loans and advances are made aren't unfair.
  • if the transactions of the company represented only by book entries have taken place and are not unjust to the company in any way
  • whether loans and advances made by the company are shown as deposits
if the private expenses (expenses not related to the company) are charged to the revenue amount
  • Whether cash has been received for the shares that were issued for cash. However, if no cash has been received, the auditor shall verify that the company’s position as stated within the books of accounts is correct, regular, and not misleading.

  1. Lend assistance in case of a branch audit
Where the auditor is the branch auditor and not the auditor of the corporate, he will lend assistance within the completion of the branch audit. He shall prepare a report supporting the accounts of the branch as examined by him and then send it across to the corporate auditor. The company auditor will then incorporate this report into the most audit report of the corporate. In addition to the present, for the asking, if he wishes to, he may provide excerpts of his working papers to the corporate auditor to assist with the audit. The accounts of a branch office are often audited by:
  • a company’s auditor
  • any individual appointed as the branch auditor as per the act
  • company’s auditor or accountant or any competent person appointed as per the laws of the foreign country in case of a foreign branch
Thus, a branch auditor must prepare a report with regards to the accounts of the branch examined by him. He must make sure that proper books are maintained and hence give reasons of qualification within the report. After preparing the report, the branch auditor must submit this to the company’s auditor. Furthermore, the company’s auditor shall examine such a report in a manner as he deems fit.

  1. Comply with Auditing Standards
The Auditing Standards are issued by the Central Government in consultation with the National Financial Reporting Authority. These standards aid the auditor in performing his audit duties with relevant ease and accuracy. The auditor must suit the standards while performing his duties as this increases his efficiency comparatively. The central government establishes the auditing standards in consultation with the ICAI and National Financial Reporting Authority (NFRA). These standards help the auditors to look at the books of accounts effectively and with great accuracy. Thus, every auditor must suit the established auditing standards while examining a company’s books of accounts

  1. Reporting of fraud
Generally, within the course of performing his duties, the auditor may have certain suspicions regarding fraud that’s happening within the corporate, certain situations where the financial statements and the figures contained therein don’t quite add up. When he finds himself to be in such situations, he will need to report the interest to the Central Government immediately and within the manner prescribed by the Act. A company’s auditor while performing his duties might encounter fraudulent situations. In such circumstances, the auditor may believe that an offense like fraud has been committed against the corporate. And such fraud has been committed by any of the officers or the company’s employees. Thus, in such situations, the auditor must report such matters to the central government within 60 days of his knowledge.

  1. Adhere to the Code of Ethics and Code of Professional Conduct
The auditor, being knowledgeable, must adhere to the Code of Ethics and therefore the Code of Professional Conduct. Part of this involves confidentiality and ordinary care within the performance of his duties. Another important requisite is professional scepticism. In simple words, the auditor must have a questioning mind and must be aware of possible mishaps, errors, and frauds within the financial statements. One of the essential principles that govern an audit is confidentiality. Thus, the auditor should maintain the confidentiality of data acquired while performing his duties as an auditor. He shouldn't disclose the client's information without his prior permission. Furthermore, the auditor must be honest, sincere, impartial, and free from biasness. Thus, he should exercise a high degree of integrity and objectivity while examining the company’s books of accounts.

  1. Assistance in an investigation
In the case where the company is under the scope of an investigation, it is the duty of the auditor to provide assistance to the officers as required for the same. Hence, it is often seen that the duties of the auditor are pretty diverse, it's an all-around and far-reaching impact. The level of assurance provided by a group of audited financial statements is relatively far higher as compared to regular unaudited financial statements. Investigation refers to checking specific records of a business systematically and critically. Such an examination is conducted when a fault on the part of the corporate already exists and therefore the investigation intends to seek out a reason and person involved in such an activity. Thus, it's the duty of an auditor to help the officers undertaking such an investigation.  
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